Are you relying on credit because your paycheck doesn’t last for the month? If the answer is yes, you are not alone. Here’s how fast the average Brits spend their wages and how you could better manage your money.
How long does the average UK salary last?
According to new research, the average UK salary does not last long. Credit and Debt Management Company Lowell examined how fast the British spend their monthly salary. The results are certainly revealing.
- Almost one in ten of us spends at least 60% of our salary in the first week alone. This means that many of us could get into financial trouble just days after payday.
- In Leeds alone, residents spend an average of 51% of their salary in the first week.
- On the flip side, Brighton residents spend the least, with residents spending an average of 39% of their monthly salary in the first few days.
Why are we burning our paychecks so quickly? Well, there is no single explanation, but some reasons could be:
- Many people set up direct debits to match their bills with their wages. So if you get paid and all your bills come out within days, you could be spending a good chunk of your paycheck very quickly.
- If you have high monthly expenses, whether it’s credit card bills or loan payments, you’re already spending a large chunk of your paycheck for the most part.
- Some people like to splurge after payday, which leads to spending money rather than saving.
How many of us save our wages?
Speaking of saving money, how many of us put money aside each month in a savings account? The answer is disturbing. According to research, 24% of us never save! That’s almost a quarter of Britons who don’t save regularly.
One of the main explanations for this is that some of us just don’t have the money to save. However, not only does saving money help you build an emergency fund to cover unforeseen expenses, it also allows you to make larger purchases without resorting to credit or incurring new debt.
How many of us actually depend on credit, and is credit a bad thing? We will take a look.
Why turn to credit?
It all comes down to living from paycheck to paycheck. If you can’t afford to save the money and are struggling to cover the essentials, you might need credit to keep you going until your next payday.
The problem? Well, there’s more than one problem with relying too much on credit, in fact:
- If you take on more credit than you can handle, you could miss payments and damage your credit score. This makes it harder to find loans and credit cards in the future when you might need them.
- If you have a credit card and you don’t pay off the balance every month, you’ll be paying interest on what’s overdue, which quickly accumulates.
- It’s tempting to overspend if you have credit, which means you’re less likely to save money or pay off debt.
At the end of the day, if you rely too much on credit, you are spending more than you can afford. Going over your finances leads to money worries, which can lead to debt down the line.
How to stop depending on credit?
To be clear, credit is not a bad thing. In fact, having a good credit history is important if you want to find a mortgage or get auto financing. This is only a problem when you have more credit than you can handle causing money worries. So, if you’re struggling to make your paycheck last, here are some tips for managing your money in a dumber (not stupidly!) Way.
- Set yourself a savings goal, even a small one. Having a goal in place will help you stay focused on saving.
- See what you are using the credit for. If you’re using a credit card to buy non-essential clothes, for example, maybe cut back on extra spending for a few months and pay off your debt instead.
- Check out the specials when you shop at the supermarket. Sometimes you can get essentials like soap or toilet paper for less if you just go with a different brand.
- Find out if switching from a high interest credit card to a 0% balance transfer credit card could save you money on interest payments.
Finally, you can always contact an organization like Advice to citizens if you have debt concerns.
Was this article helpful?
Some of the offers on The Motley Fool UK site are from our partners – this is how we make money and this site keeps working. But does this have an impact on our grades? Nope. Our commitment is for you. If a product isn’t good, our rating will reflect that, or we won’t list it at all. Additionally, while we aim to showcase the best products available, we do not review every product on the market. Find out more here. The above statements are owned by The Motley Fool only and have not been provided or endorsed by any bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. The Motley Fool UK recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard and Tesco.